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Who Pays For The Decentralized Web?

June 14, 2016

I recently attended the Decentralized Web Summit where industry giants Vint Cerf and Tim Berners-Lee spoke about designing a new architecture for the Web that was harder for businesses and governments to censor and control. This new Web would be self archiving, it would use Bitcoin as a native payment mechanism, everything would be encrypted, users would control their data, and broken links would be a thing of the past! The vision presented was so grand that it seemed fitting that we were gathered in an old church.

As the morning wore on, something began to bother me. No one was discussing the economics of this new Web. I’ve always been a bit of a troublemaker (sorry Mom), so I got up and asked the question, “Who pays for all of this?”

I was disappointed with the answers. In my view, the economic challenges of decentralized systems are often more difficult than the technical challenges. For example, Bitcoin works because miners earn money for running the network infrastructure. Take away that incentive, and everything falls apart. As I spoke with others throughout the day, it became clear that not enough thought has been given to my question.

The First Failure of P2P

I remember the excitement of the P2P revolution of the late 90’s and early 2000s. Millions were pissed off when Napster was shut down. Nullsoft, the gloriously irreverent company that created the popular MP3 player WinAmp, had sold their company to AOL. They created Gnutella, a system for file sharing that had no central point of control. It was a Napster that couldn’t be shut down. Thousands of us downloaded the software after seeing the launch on Slashdot. AOL was furious. They made Nullsoft remove the software from their servers and cease work on the project. It was too late. The launch of Gnutella marked the beginning of a peer-to-peer file sharing revolution.

Soon there were dozens of file sharing networks including Limewire, Kazaa, and eDonkey. Downloading music and pirating software had never been easier. As governments cracked down on users of these networks, they evolved to become increasingly resilient. The music, film, and software industries were forever changed.

Businesses got in on the P2P revolution as well. There was a wave of companies that were building software that didn’t require central servers. The most notable was Groove, a decentralized ancient cousin of Slack built by none other than Ray Ozzie, the creator of Lotus Notes. I remember building my own Groove applications. They worked, but they were clunky. The developer experience was horrible. I was thrilled to learn that Microsoft was going to acquire Groove for $120 million and appoint Ray Ozzie as Microsoft’s Chief Technical Officer. Surely, this was the boost that the P2P revolution needed to go mainstream.

Things didn’t work as planned. Groove was eclipsed by Sharepoint, one of most universally loathed pieces of software to ever ship. The killer app for P2P business software never materialized and what looked like a promising movement faded into obscurity.

Today we have BitTorrent, which is arguably the only success from the era.

Is This Time Different?

During the Decentralized Web Summit, Muneeb Ali of Blockstack made the observation that the Bitcoin blockchain offers a fundamental innovation that provides new hope for decentralized systems. The blockchain can serve as a trust anchor that has the potential to reduce the role of intermediaries in the Web’s infrastructure.

It will be interesting to see how this plays out over time. My own company, Tierion, is using the blockchain to build a proof engine – a global platform for verifying the authenticity and integrity of any file, data, or business process.

Bitcoin can also make it easier for computers to exchange value. Someday, each computer may use Bitcoin microtransactions to buy/sell resources with other computers on the network. This vision is reflected in the work being done at 21.co. They recently announced an open source toolkit that allows machine-to-machine micropayments.

The combination of the blockchain as a trust anchor and a global value transfer network may provide new tools for incentivizing decentralized systems. I doubt we’ll see a wholesale transition away from the current centralized architectures. Rather, we might see a gradual replacement of intermediaries with new functions provided by networks. The rise of Bitcoin and Bittorrent are prime examples.

What of the recent wave of blockchains such as Ethereum? They’ve financed their network through speculation and piggybacking on Bitcoin’s hype and infrastructure. It’s unclear if there’s real value being created.

What’s clear is that one cannot ignore the costs of running decentralized networks if the vision presented at the Decentralized Web Summit is to come to fruition. More thought needs to be put into incentivizing actors to subsidize the cost of the network infrastructure. I suspect there may be new economics to discover and maybe even a Nobel Prize for those who blaze a path forward.

It’s difficult to make predictions, especially about the future. Maybe we’re at the dawn of a revolution in decentralization. Perhaps the giants of today, Google, Facebook, Apple, Microsoft, and others, will fall as a new wave of decentralized networks disrupt their core businesses. Or, maybe it’ll be like the P2P revolution – a movement that fades quickly and leaves us with a few new useful technologies.